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Jakarta Post

Indonesia in catch-22 situation over wages

  • The Jakarta Post

    The Jakarta Post

Jakarta   /   Fri, September 6, 2013   /  11:11 am
Indonesia in catch-22 situation over wages Labor power: Thousands of workers approach Merdeka Palace as they march through Jakarta on Thursday to demand an end to the cheap labor policy and outsourcing system as well as to seek an increase in the regional minimum wages. (JP/Ricky Yudhistira) (JP/Ricky Yudhistira)

Indonesia seems unable to raise the wages of its workers without pricing itself out of the global-competitive market, according to a survey announced Thursday.

The wage hikes in recent years had not been accompanied by increased workforce productivity in Indonesia in contrast with China, where productivity has risen faster than the wage increases, a Centre for Strategic International Studies (CSIS) survey showed.

Indonesia'€™s average minimum wage rose by 5.5 percent between 2000 and 2011 but productivity only improved by 3.4 percent, while in China the figures were 7.2 and 10.1 percent, respectively. Vietnam, which Indonesia is also competing with to attract investors, has seen average minimum wages rise by 7.4 percent against 4.2 percent productivity.

'€œIf we observe, other countries did not raise [the minimum wage] that high,'€ CSIS senior researcher Haryo Aswicahyono said in a public discussion on the labor and wage situations in Indonesia.

Minimum wages across Indonesia increased by 30 percent from 2010-2013, the highest increase compared to Thailand (14.2 percent), China (8.4 percent), Vietnam (6.7 percent), Cambodia (5.2 percent), Malaysia (3.3 percent) and the Philippines (3.1 percent), the research showed.

In 2013, which the survey did not cover, the minimum wages across Indonesia increased by an average of 18.3 percent compared to the year before, led by Jakarta with 44 percent.

The survey came out just as representatives of workers and employers are set to begin negotiations, along with the government, to set new minimum wages for 2014.

However, last week President Susilo Bambang Yudhoyono issued an instruction limiting a minimum wage increase of inflation plus 5 percent for labor intensive industries and inflation plus 10 percent for others.

Labor power: Thousands of workers approach Merdeka Palace as they march through Jakarta on Thursday to demand an end to the cheap labor policy and outsourcing system as well as to seek an increase in the regional minimum wages. (JP/Ricky Yudhistira)Labor power: Thousands of workers approach Merdeka Palace as they march through Jakarta on Thursday to demand an end to the cheap labor policy and outsourcing system as well as to seek an increase in the regional minimum wages. (JP/Ricky Yudhistira)
On Thursday, about 20,000 workers rallied in front of the Presidential Palace to demand a wage increase of up to 68 percent, or Rp 3.7 million (US$333.1), next year.

'€œ[It is common for] workers everywhere to compete by [their] productivity. But workers here think that their wage will increase just by staging a rally. It'€™s impossible,'€ said Indonesian Employers Association (Apindo) chairman Sofjan Wanandi, who was present at the discussion.

He said for example, the productivity of Jakarta'€™s workers showed no improvement even after the 44 percent wage increase by the city administration.

CK Song, head of the Korean Chamber of Commerce and Industry in Indonesia (Kocham), also felt the dilemma after a number of South Korean employers were forced to lay off more than 78,000 workers as of today due to the wage increase requirement. '€œWe don'€™t expect the workers to increase their productivity by 10 percent for a 10 percent wage increase; they'€™re human beings who have limits.'€

He said foreign investors would not mind increasing their workers'€™ salaries, but uncertainty in doing business here was of utmost importance.

'€œWe really want to make sure that Indonesia has long term prospects,'€ Song said.

Commenting on the issue, All Indonesia Labor Union (SPSI) chairman Sjukur Sarto dismissed the argument that there should be connection between the minimum wage increase and the increase of productivity, saying the minimum wage required by the government served as a safety net for new, inexperienced workers.

'€œWith minimum wages, [employers] get minimum productivity [from their workers],'€ he said.

He said 21,000 workers in Bekasi, West Java, and Jakarta grouped under the union had failed to enjoy a wage increase after being laid off, but he refused to admit that the massive layoffs resulted from the wage increases. (nai)

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